Apple shares rise despite profit fall. Apple (AAPL) shares climbed 3.6% pre-market after the company's FQ3 earnings beat expectations, helped by strong iPhone sales of 31.2M, up 20% from a year earlier. EPS came in at $7.47, but net profit dropped to $6.9B from $8.8B, while revenue only inched up 1% to $35.3B. The gross margin fell, as did sales to Europe and China, and iPad volumes of 14.6M disappointed. "Competition is heating up," says market strategist Laurence Isaac Balter. "They need to come up with some game-changers pretty soon."
PMI suggests eurozone leaving recession. Eurozone flash manufacturing PMI has increased to a two-year high in July and returned to expansion, rising to 50.1 from 48.8 in June and topping consensus of 49.2. Composite output has climbed to 50.4 from 48.7 and also beat forecasts. "The best (composite) PMI reading for 1 1/2 years provides encouraging evidence to suggest that the euro area could – at long last – pull out of its recession in the third quarter," says Markit.
HSBC China PMI hits 11-month low. HSBC China flash PMI has dropped for the third consecutive month in July, declining to an 11-month trough of 47.7 from 48.2 in June. The employment sub-index slumped to 47.3, its lowest level since March 2009, while new orders also hit an 11-month bottom. The numbers point to "a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster de-stocking," says HSBC.
Top Stock News
AT&T earnings hit by phone subsidies. AT&T's (T) net profit slipped 2.1% to $3.82B as costs rose due to heavy subsidies for smartphones. EPS of $0.67 missed consensus, although revenue increased 1.6% and topped forecasts, helped by growth at AT&T's wireless and enterprise businesses. The carrier added over 550,000 mobile contract customers in Q2, ahead of its target for 500,000, although the unit's profit margin slumped to 42.4% from 45.8%. Shares were +0.45% pre-market.
Dell set for key shareholder ballot - again. Dell (DELL) is due to hold a shareholder vote today over the $24.4B offer from Michael Dell and Silver Lake to take the struggling company private. Dell reportedly might again delay the ballot, as holding it after August 3 would allow the company to change the date of record for shareholders eligible to vote from early June. Dell hopes that this could help it win the 22% of shareholder votes that weren't cast and thus registered as "no" votes.
Facebook and Zynga seen moving in opposite directions. Results from Facebook (FB), Zynga (ZNGA) and Visa (V) are among the tsunami of earnings due for release after the bell today. Analysts expect Facebook's (FB) Q2 EPS to have risen to $0.14 from $0.12 a year earlier and its revenue to have jumped 36.7% to $1.62B. Zynga is seen swinging to a loss per share of $0.04 from a profit of $0.01 as its revenues slumped 38.5% to $185.4M. Visa's FQ3 EPS is estimated at $1.80 vs $1.56 and its revenue at $2.89B, up 12.9%.
SAC Capital faces criminal charges. Federal prosecutors could reportedly file criminal charges against SAC Capital this week over alleged insider-trading, although authorities are not planning to indict founder Steven Cohen due to a lack of evidence. Cohen still faces civil charges from the SEC that he failed to properly supervise SAC. The latest developments come despite the firm agreeing to pay a record $616M in March to settle civil insider-trading allegations with the SEC.
S&P announces changes to indexes. Salix Pharmaceuticals (SLXP) will replace Gardner Denver (GDI) in the S&P MidCap 400, Agree Realty (ADC) will replace Salix in the S&P SmallCap 600, and DXP Enterprises (DXPE) will replace True Religion Apparel (TRLG) in the SmallCap 600.
Top Economic & Other News
Detroit heads to court. U.S. Bankruptcy Judge Steven Rhodes is due to hold a hearing over Detroit's bankruptcy filing today, when the city will request confirmation of its immunity to lawsuits, as well as protection for Michigan Governor Rick Snyder, State Treasurer Andy Dillon, Emergency Manager Kevyn Orr and others. Those against the request, such as Detroit workers, retirees and pension funds, argue that the bankruptcy filing breaches Michigan's constitution.
Japanese export growth slows. Japanese exports increased for a fourth consecutive month in June, rising 7.4% on year, although that marked a slowdown from +10.1% in May, while the reading also missed consensus of +10.3%. Imports grew 11.8% and the trade deficit widened to ¥180.8B ($1.81B) from ¥996.4B. Exports to the U.S., China and even the EU increased. "The effect of the yen's weakness on exports is becoming very clear," says RBS economist Junko Nishioka.
Quarter of homeowners in government program default again. Over 306,000 of the 1.2M delinquent homeowners who have received loan modifications under the Home Affordable Modification Program (HAMP) since it was introduced in 2009 have re-defaulted, an audit shows. The cost to the taxpayer is $815M. "Treasury does not understand and the servicers do not understand why homeowners are falling out," says Christy Romero, the Special Inspector General for the Troubled Asset Relief Program.
President Obama set to start economy tour. President Barack Obama is due to give the first in a series of major speeches about the economy today. Obama will lay out broad themes in the address and use subsequent ones to discuss ideas about manufacturing, health care, jobs, housing and education. The President intends to implement some policies through executive action, while others will need Congressional approval, a requirement that has stymied many of his previous ideas.
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In Asia, Japan -0.3% to 14731. Hong Kong +0.2% to 21969. China -0.5% to 2033. India -0.9% to 20,116.
In Europe, at midday, London +0.6%. Paris +0.9%. Frankfurt +0.7%.
Futures at 6:10: Dow +0.1%. S&P +0.1%. Nasdaq +0.75%. Crude -0.1% to $107.14. Gold +0.3% to $1339.80.
Notable earnings before today's open: ABC, AOS, ARMH, ARW, ATI, BA, CAT, CFR, CKSW, CP, CVE, DAL, DPS, ECA, ELN, EMC, EVR, F, GD, GNTX, ICON, LAD, LCC, LL, LLY, MCO, MDCO, MSA, MSI, MTH, NDAQ, NOC, NOR, NYCB, OC, OCR, PCH, PEP, PLD, PVR, PX, RAI, RCI, RDN, RES, RLGY, SAVE, STX, TEL, TMO, TROW, TUP, WLP, WYN
Notable earnings after today's close: AEM, AIZ, AKAM, AMCC, AMP, ANGI, ARII, ASGN, AVB, BDN, BIDU, CA, CAKE, CCI, CDNS, CLGX, CMO, CMRE, COG, CROX, CTXS, CYH, EFX, EGHT, EQIX, ETFC, FB, FBHS, FFIV, FLOW, FLS, FOE, FTNT, GGG, GPRE, HRC, IM, INFN, ITC, ITMN, KEX, LOGI, LSI, LVS, MLNX, MTSN, NFX, OI, OII, ORLY, PDH, PMTC, QCOM, RJF, RRC, RT, RYL, SCI, SGMO, SKX, SLG, SQNM, SRCL, SUSQ, SWFT, SYNC, TAL, TCBI, TER, TEX, TQNT, TRIP, TSCO, TWI, V, VAR, WCRX, WDC, WLL, WRE, WSH, XOOM, ZNGA
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